Fidelity has been under fire for its FundsNetwork 401(k) offering. The FundsNetwork is where various mutual funds, affiliates of mutual funds, mutual fund advisors, sub-advisors, investment funds, including collective trusts, and other investment advisors, instruments or vehicles that are offered to the plans through Fidelity’s FundsNetwork pay Fidelity to be a part of the fund lineup.

A class-action lawsuit by a participant of T-Mobile’s 401(k) plan claimed the payments were “secret payments to Fidelity for its own benefit in the guise of ‘infrastructure’ payments or so-called relationship-level fees” in violation of ERISA’s prohibited transaction rules.” Fidelity isn’t the only bundled provider with this type of fund lineup where fund companies make payments to be a part of the network.

The case was thrown out because Fidelity wasn’t a fiduciary and there was no proof that these “shelf-space payments” increase participants’ costs. Shelf space payments aren’t OK with me, but it is a giant loophole through the fee disclosure rules because there is no nexus between these payments and costs charged directly or indirectly by any plan provider to the plan.

Shelf-space payments will continue to exist as long as the Department of Labor doesn’t close the loophole that allows it.